The price of shares in Audio Pixels Holdings Ltd (ASX: AKP) slid 2.5% lower to $16 after the company released its annual report on Wednesday. Revenues for the year ended 31 December 2017 were down 36.7% to $65,624 and were made up entirely of interest payments. Overall, the company reported an annual loss of $5.9 million, up 17% on the prior year.
The result isn't surprising, considering Audio Pixels is still attempting to commercialise its digital audio loudspeaker technology.
Audio Pixels claims to have developed "ground-breaking MEMS (Micro Electro Mechanical Structure) based digital loudspeaker technologies" which it believes can revolutionise the multi-billion dollar global loudspeaker market. MEMS is essentially a fancy way of describing incredibly tiny, microscopic machines with multiple moving parts.
The company has stated that its mission is to radically transform the loudspeaker industry, from its analogue origins into a new digital age. It compares this transformation to the technological advances made in the display industry when cathode ray tubes (CRT) were replaced with light emitting diodes (LED).
If Audio Pixels is able to deliver on this mission then it could be great news for its shareholders. Loudspeakers are just as ubiquitous in modern life as televisions – and think of how quickly those bulky old CRT TVs went from your lounge room to your nature strip once flat screen LED TVs were released.
However, the operational review included in today's annual report didn't really provide the market with any information it didn't already know. Progress towards mass commercialisation has been slow – and may even be testing the patience of some investors judging by the drop in the company's share price today.
Audio Pixels' commercialisation plans hit a snag in December when the company received faulty 'wafers', an element in its microchips, from one of its vendors. However a new functioning batch was received earlier this week and product development is now back on track, with more of the properly fabricated wafers due for delivery by the end of March. Audio Pixels is actually now trying to repair the faulty wafers it received in order to find some sort of use for them.
But the company was forced to admit that due to the complexity of the technology it is difficult to accurately predict a timeframe in which commercialisation can be achieved. This lack of certainty may not have been the message many investors would have wanted.
It's worth noting that Audio Pixels is making great efforts to defend its technology and intellectual property from imitators: it currently has 102 patents granted in various jurisdictions worldwide, with another 32 applications outstanding. The company also claims to be in contact with a number of future customers, which could provide it with a strong launch pad if it can successfully commercialise its product.
Foolish takeaway
Since hitting a 52-week high of $26.09 back in October, Audio Pixels' share price has generally been trending downwards, and unfortunately this most recent report may not do much to stem the sell-off.
The company's technology sounds exciting and could very well be disruptive to the loudspeaker industry – but without any substantive progress in its commercialisation process Audio Pixels is still only a speculative investment at present.
In my opinion its $440 million market cap is too high, and I think its share price will most likely continue to drop in the absence of any other company announcements.
